Friday, July 31, 2009

Many old memories have bubbled to the surface since the Atlas Economic Research Institute invited me to speak at their conference in Canada next week -- on a panel about supply side environmentalism -- primarily because Atlas founder, Sir Antony Fisher, was a good friend and influential mentor to me in my youth. Many of the core ideas that I write about on this blog are a direct outgrowth of Sir Antony's free market environmentalist influence. So addressing his organization, his intellectual descendants, feels a bit like coming full circle.

Sir Antony was a frequent overnight guest in my family's Manhattan apartment in the 1970's and early 1980's, a wanderer on a great mission -- a mission he shared with my father, Randy Richardson, then President of the Smith Richardson Foundation, and others -- a mission to spread the idea of liberty. There can be no doubt that Sir Antony is one of liberty's great unsung heroes, directly instigating the creation over 150 libertarian or free market think tanks world wide in his lifetime -- including many of the most influential, such as the Institute For Economic Affairs in London, The Manhattan Institute, The Fraser Institute in Canada, and the Pacific Research Institute in San Francisco. That network of think tanks, supported and fostered by Atlas, has now swelled to well over 300.

My dad half-jokingly call him "the Johnny Appleseed of ideas." He was a fascinating Englishman, and we were only too happy to help him in his mission, and provide him with shelter and meals whenever he blew into town.

Sir Antony and my dad clicked on so many levels. Both were WWII veterans, my dad a grunt in Patton's Third Army, Fisher more glamorously, a decorated RAF pilot who flew alongside and lost his brother in the Battle of Britain. The war taught them a deep, lifelong hatred of totalitarianism in all its flavors. So both became champions of liberal democracy and free markets. Both were entrepreneurs and aquaculture pioneers, with a passion for doomed sea farming ventures: Fisher ran a green sea turtle farm in the Cayman Islands, while my dad in those days launched innovative ventures with mussels, clams and shrimp. (Dad sometimes referred fondly to Sir Antony as "that gentleman turtle farmer.")

They advised each other on these ventures, and stoked a kind of wild eyed mania in each other for the dream of saving the planet by farming the sea. Whenever Sir Antony would show up, we would trade long yarns, war stories and fish tales until late into the night. I of course got quite caught up in all this, eventually taking time off after my freshman year in 1980 to do underwater construction on the first US mussel farm, BlueGold Sea Farms, located in Narragansett Bay, RI. The next time I saw Sir Antony, he was keen to hear all about my experiences working 50 feet down in pitch black freezing water, lowering, guiding and then unshackling two ton mooring blocks, sunk six feet in mud, while scores of giant spider crabs circled and closed in. Ah, the romance of the sea!

(I remember thinking enviously that Sir Antony at least had the good sense to do his sea farming on a tropical island with warm, clear water and resort facilities.)

But for me, the most seductive aspect of the various aquaculture ventures we discussed with Sir Antony was not their potential profitability, but their innovative idealism. To us, sea farming was a way to feed a world in danger of overpopulation and starvation, a way to provide massive amounts of cheap high quality protein well beyond the overstretched capabilities of dirt farmers. Sir Antony was not just trying to turn a buck with his green sea turtle farm, he was saving an endangered species. A portion of all turtle hatchlings at the farm were raised until able to fend for themselves, then released into the wild. Sir Antony was actually increasing wild turtle populations, actually saving the green sea turtle. Ironically, the farm was done in by radical environmentalist who banned the sale of all green sea turtle products, regardless of origin, and refused to listen to reason. Sir Antony's turtle farm would have been successful, but for this.

Of direct relevance to the Atlas conference in Canada, to our panel on supply side environmentalism, is then the legacy of Sir Antony's free market environmentalism, and his personal impact on the ideas I will be presenting. A key point is that the founder of the Atlas network, Sir Antony Fisher, was NOT dismissive of environmental concerns, but passionate about them. He was only critical of ill-conceived big government solutions to these problems. Rather, he cared deeply about beautiful endangered species such as the green sea turtle, and personally committed his time and fortune to saving them, through free market means. (Note that Sir Antony was well ahead of the curve with this strategy. Nowadays is is commonplace for groups like the Rainforest Alliance to promote the idea of saving an endangered resource like the rainforest by turning it into a sustainable commercial opportunity.)

As Atlas network think tanks ponder the way forward in the wake of the financial crisis and the electoral gains of liberals, we could do no better than to consider Sir Antony's passion for green sea turtles. Don't waste time dismissing liberal environmental concerns. Instead, get passionate about solving real environmental problems. Promote free market solutions that work better than tax, spend and regulate, that leave the economy in better shape than if we did nothing (regardless of whether the problem is real or not). In other words, steal the issue by providing better, cheaper, prosperity-inducing solutions.

Friday, July 3, 2009

Nationally syndicated pundit Deroy Murdock has taken up the green energy tax cut cause with spirit and passion in his latest column for Scripps Howard News Service and National Review Online. Mr. Murdock quotes me and this blog extensively. He points out that the cap and trade bill in Congress will likely act as an energy tax, depressing the economy further, while a green energy tax cut would both stimulate the economy and more effectively shift America away from dirty fuels and inefficient vehicles.

On the other hand, Cato Institute scholar Alan Reynolds, for whom I have enormous respect as one off the founding fathers of supply-side economics, has most disappointingly joined the chorus of those calling for a gas tax in a op-ed in the Wall Street Journal. Reynolds is one of the key guys who made the Reagan tax cuts happen, so it is frustrating to see him now championing tax hikes. Worse, he is part of an increasingly weird phenomenon of folks who call themselves libertarian/supply-side/or free market economists who now voice some support for energy taxes. This group includes Harvard economists Jeffrey Miron and Greg Mankiw, as well as Cato Senior Fellow Jerry Taylor, whom I debated at some length in January.

Of course, neither carbon nor gas tax hikes have any real basis in libertarian or supply-side theory. What precisely is behind this misguided pro-tax advocacy will be a subject for a future post.

To his credit, Reynolds rationale for a gas tax is better than most. Reynolds is rightly concerned that new CAFE fuel efficiency standards (which already shut down the previously successful Caterpillar Diesel Truck Engine division just last year) will kill GM. Further, he rightly points out that because we apply a 24¢/gallon tax to diesel, our most efficient fuel, but not to gasoline and ethanol, we create an economic distortion that decreases American fuel efficiency. Reynolds argues that a 24¢/gallon tax on both gas and ethanol would level the playing field, increasing American fuel efficiency and the spurring the development of more fuel efficient cars without the potentially catastrophic damage CAFE will do to GM and Chrysler.

The problem with Reynolds' proposal is that, in the current climate, if Republicans who listen to people like Reynolds become friendly to a gas tax, we will get BOTH the new, harsh CAFE standards AND a new gas tax. The Democrats have blinders on to any economic damage that might result from their most beloved green policies: CAFE, energy taxes and subsidies. They are not going to listen to Mr. Reynolds criticism and will insist on the policies they want, and use any support they get from the pro-energy-tax libertarians to ram that policy through too.

Further, just as the Democrats turn a blind eye to the damage from CAFE, Reynolds also turns a blind eye to the damage that will be caused by the taxes he proposes. All energy taxes create a dead-weight loss that act as a drag on the entire economy, raising prices, depressing nearly all economic activity. Reynolds ignores that inconvenient truth, as do his pro-tax libertarian colleagues.

The saddest part of it is that Reynolds should know better. If supply-side tax cut prescriptions work for the entire economy, they will also work for Americas' green industries, while stimulating the entire economy in the process. Mr. Reynolds should have provided a real alternative not only to CAFE, but to the entire tax/subsidize/regulate Democrat energy agenda. CAFE standards should not be used to force companies to make uneconomic decisions, but as the basis of a schedule of tax relief encouraging companies to invest in the most fuel efficient vehicles. Not only should such vehicles be tax free to the extent they meet or exceed CAFE standards, but companies that meet them (and their stocks and bonds) should be income and capital gains tax free in proportion to the percentage of highly fuel efficient vehicles that such companies sell. Far from depressing the economy as would any energy tax, such CAFE-based green tax cuts would stimulate both the economy and massive new investment in a green retooling of the auto industries -- without a bailout -- as I discuss here.

Spurring new green investment is essentially a supply-side problem, amenable to supply-side solutions. Reynolds and his pro-energy-tax economist colleagues should learn that energy tax hikes do not spur green investment. These folks need to take a hard look at the experience of Scandinavian countries that have employed aggressive carbon taxes since the 1990s with (surprise!) no net reduction of carbon emissions. This failure is explained by the fact that energy taxes starve industries of the very revenue and new capital that are most needed in order to invest in green technologies. If new green investment is what is needed, supply-side green tax cuts are the best way to go.